The FCA and PRA must have heaved a sigh of relief last week when news of the High Court ruling reached them.
Regulators have been holding their breath since the insolvency and corporate court ruling last year that an FCA warning notice (for violation of listing rules and market abuse) was subject to suspension of the action and the liquidation procedure.
Regulators would undoubtedly have feared that due to current economic circumstances, they would encounter more and more insolvent companies during attempted enforcement actions – not to mention the fact that entities could be emboldened by the decision to ” initiate insolvency proceedings to avoid regulatory action.
Fortunately for regulators, the High Court disagreed on appeal, ruling that a warning notice from the FCA for violation of listing rules and market abuse is not subject to suspension of listing. liquidation.
The High Court expressly declined to rule on other types of advice and on opinions issued other than for breaches of listing rules and market abuse. But it is likely that a court applying the reasoning of the High Court in the future would come to the same conclusion with regard to the vast majority of statutory opinions issued under the FSMA. This is because they generally share the same cues that the High Court found relevant in this case: they are administrative decision-making processes by a government body (the RDC is quasi-independent, but not independent enough; and referrals by the Upper Tribunal are a dumb separate instance and in any event, they are started by the subject rather than by the FCA and would therefore not be caught up by the stay).
This means more work for insolvency practitioners: FCA and PRA enforcement action may be taken during insolvencies, so practitioners will once again have to think about (and the resources of the insolvent entity). ) to actively participate in the execution process.
Of course, once the FCA or PRA has imposed a fine, in order to collect that fine, they must initiate legal proceedings – proceedings that would typically be subject to an insolvency stay. The overall goal of an insolvency stay (to prevent one party from “skipping the line” to access the remaining assets of an insolvent firm) remains intact.